Banking News

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Barclays shares up 23% amid iShares talks

17 March 2009 / by Rebecca Sargent

Barclays shares soared yesterday as it emerged the bank is considering alternative fund raisers to Government money.

Shares in the bank closed at 90.90p yesterday, 22.7 per cent higher than when the markets opened. The increase followed Barclays' confirmation of the potential sale of iShares, its exchange-traded funds division.

In its statement Barclays said, "Barclays businesses continue to perform well and have a strong start to 2009."

However, the bank also confirmed that it is in 'dialogue' with the Treasury over its potential participation in the Asset Protection Scheme, which could insure some of its toxic assets, but at the price of a large fee or Government stake holding in Barclays.

Since the Asset Protection Scheme was announced earlier this year, Royal Bank of Scotland has covered £325billion in toxic assets, while Lloyds Banking Group has used it to insure £260billion worth.

Both banks paid fees in the form of shares to participate in the scheme, and both are now majority owned by the taxpayer. Both banks have also agreed to boost lending in the form of mortgages to homeowners and loans to small business enterprises.

However, according to reports, Barclays hopes to avoid this through the sale of some assets such as iShares. In its statement yesterday the bank said: "Barclays notes press comment regarding the potential disposal of iShares and confirms that it has held discussions with a number of potentially interested parties as part of its practice of regularly reviewing the Group's portfolio of businesses."

According to reports, the funds raised from any sales could be used to pay the Government's Asset Protection Scheme fees in cash as opposed to a Government share holding, if it decides to participate.

However, the bank added: "No decision regarding the disposal of any business has been taken by the board of Barclays."

Reports today suggest that in addition to the possible sales, Barclays may be trying to persuade its Middle Eastern investors, which already hold a 26 per cent stake in the bank, to inject further cash.

Banks have until March 31 to request participation in the Asset Protection Scheme.